Warning to all taxpayers – Pay your taxes on time amidst rising interest rates
As the deadline for paying any tax approaches, it is crucial you make your payments accurately and on time before it is too late.
If you do not pay your tax obligations by 31 January 2024, HM Revenue & Customs (HMRC) will charge you interest on any unpaid tax.
The tax authority’s interest rates have hit their highest rate for more than 20 years, and you need to understand how this will affect you and your tax obligations.
The interest rate, for unpaid tax, has increased to 7.75 per cent. HMRC’s interest rate does change and is calculated as the Bank of England base rate, plus 2.5 per cent.
Along with high interest rates, you need to be aware of the financial penalties that you might face if you make a late payment.
With the interest rate rising significantly, you need to know whether you can financially afford to pay these penalties if you file your tax return late.
What happens if my tax payments are late?
Filing a return after midnight on 31 January will result in a £100 penalty.
After three months, a penalty of £10 a day will be introduced until the payment is made.
The maximum this penalty can rise to is £900.
If your tax is outstanding after six months, the penalty will be charged at a rate of £300, or five per cent of your overall tax liability if it is higher.
Any tax returns over 12 months late will be charged an extra £300 or five per cent of the overall tax liability if greater.
How can I avoid the penalties?
Overall, you should ensure you pay your tax on time and as accurately as possible.
If you cannot do this or are worried about the additional charges you might incur, it is recommended you make an estimated payment to avoid these penalties.
Whilst an estimated payment allows you to avoid financial penalties, you need to remember your payment might not be correct at the time which is something you need to check.
There are also some excuses HMRC will consider to be reasonable if you file late.
These include:
- A relative passing away close to the deadline
- If you were in hospital or had a life-threatening illness
- Your computer, or any other device used to submit your tax return, broke
- HMRC services were down.
Any amendments to a tax return can be made to a tax return up to 12 months from 31 January 2024, however interest will be charged if you underpaid.
Amending your return can be done if you:
- Realise you have missed a relief which you were entitled to such as relief for Gift Aid contributions.
Missing tax relief means you might be entitled to a tax refund.
If you would like advice on how to make your tax payments on time, and avoid penalties, contact us today.
